Front Matter Page
© 2010 International Monetary Fund
December 2010
IMF Country Report No. 10/361
Burkina Faso: First Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for a Waiver of Nonobservance of Performance Criterion—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Burkina Faso.
In the context of the first review under the three-year arrangement under the extended credit facility and request for a waiver of nonobservance of performance criterion, the following documents have been released and are included in this package:
The staff report for the First Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for a Waiver of Nonobservance of Performance Criterion, prepared by a staff team of the IMF, following discussions that ended on September 30, 2010, with the officials of Burkina Faso on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on November 18, 2010. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A Press Release summarizing the views of the Executive Board as expressed during its December 3, 2010 discussion of the staff report that completed the request and/or review.
A statement by the Executive Director for Burkina Faso.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Burkina Faso* Memorandum of Economic and Financial Policies by the authorities of Burkina Faso*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
700 19th Street, N.W. • Washington, D.C. 20431
Telephone: (202) 623-7430 • Telefax: (202) 623-7201
E-mail: publications@imf.org Internet: http://www.imf.org
International Monetary Fund
Washington, D.C.
Front Matter Page
INTERNATIONAL MONETARY FUND
BURKINA FASO
First Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for a Waiver of Nonobservance of Performance Criterion
Prepared by the African Department
Approved by Peter Allum and Thomas Dorsey
November 18, 2010
The arrangement. On June 14, 2010 the Executive Board approved Burkina Faso’s three-year arrangement under the Extended Credit Facility (ECF) totaling SDR 46.154 million (76.67 percent of quota).
The mission. The team comprised Mrs. Kabedi-Mbuyi (Head), Ms. Diouf, Ms. Adenauer (resident representative), and Messrs. Boutin-Dufresne and Lonkeng Ngouana (all AFR). The mission took place in Ouagadougou during September 16–30, 2010. The team met with Mr. Lucien N. Bembamba, Minister of Economy and Finance; Mr. Bolo Sanou, the National Director of the BCEAO; and other senior officials. Discussions were also held with the private sector, labor union representatives, civil society organizations, the donor community, and the press.
Mission outcome. Performance under the program was generally satisfactory. At end–June 2010, the authorities implemented all structural benchmarks, and met all quantitative performance criteria but one. They are requesting a waiver for nonobservance of the performance criterion on the overall deficit, which was due to the delayed disbursement of budget grants. Staff supports the authorities’ request because the breach was temporary. Because the budget grants expected in June were disbursed in August, the authorities expect to meet the end–December fiscal target. Staff recommends the completion of the first ECF review based on the authorities’ performance record and policy commitment in the attached Letter of Intent.
Contents
Executive Summary
I. Recent Developments and Short-Term Outlook
II. Performance under the Program
III. Policy Discussions
A. Strengthening and Diversifying Growth
B. Improving Fiscal Sustainability
C. Addressing External Sector Vulnerability
IV. Program Modalities and Risks
V. Staff Appraisal
Tables
1. Selected Economic and Financial Indicators, 2007-14
2. Balance of Payments, 2007-14
3. Monetary Survey, 2007-11
4. Consolidated Operations of the Central Government, 2007-14
5. Indicators of Capacity to Repay the Fund, 2008-14
6. Schedule of Disbursements Under the ECF Arrangement, 2010-13
7. Poverty-Reducing Social Expenditures, 2001-10
8. Selected Indicators on the Millennium Development Goals, 1990-2008
Figures
1. Burkina Faso and WAEMU Comparators: Recent Economic Developments and Medium-Term Prospects
2. Fiscal Indicators, 2002-13
3. Financing from the Regional WAEMU Bond Market, 2007-13
4. External Sector Indicators, 2005-13
5. Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2010-2030
Appendix I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies for 2010-11
Attachment II. Technical Memorandum of Understanding
List of Acronyms
| BCEAO |
Central Bank of West African States |
| BIC |
tax on industrial and commercial profits |
| GNF |
goods and nonfactor services |
| GNI |
gross national income |
| CPIA |
Country Policy and Institutional Assessment |
| DeMPA |
Debt Management Performance Assessment |
| IGF |
Inspection Générale des Finances (General Finance Inspection) |
| LTO |
large taxpayer office |
| MCC |
Millennium Challenge Corporation |
| MEFP |
Memorandum of Economic and Financial Policies |
| MTO |
medium taxpayer office |
| PV |
present value |
| OHADA |
Organization for the Harmonization of Business Law in Africa |
| PC |
performance criterion |
| PFM |
public financial management |
| PRSP |
Poverty Reduction Strategy Paper |
| REER |
real effective exchange rate |
| SCADD |
Stratégie pour une Croissance Accélérée et pourle Développement Durable (Strategy for Accelerated Growth and Sustainable Development) |
| SOFITEX |
Société Burkinabè des Fibres Textiles (The largest cotton ginning company) |
| VAT |
value-added tax |
| WAEMU |
West African Economic and Monetary Union |
Executive Summary
Economic recovery gained momentum in the first half of 2010, and short-term prospects have improved. Private sector activity has picked up, and agriculture production increased because of favorable climatic conditions, thus keeping price pressures down. With improved prospects in the cotton and mining sectors, economic growth in 2010-11 is projected to be higher than originally anticipated.
Program implementation was generally good. The authorities met all end-June quantitative performance criteria (PCs) but one. The PC on the overall deficit (commitment basis, including grants) was above the target because a significant share of budget grants programmed for end-June was disbursed in August. The authorities observed structural benchmarks through end–September, and made progress on measures programmed for the remainder of the year.
Fiscal consolidation is essential for Burkina Faso’s macroeconomic stability and debt sustainability. The authorities’ medium-term fiscal strategy focuses on enhancing revenue performance and increasing spending in priority areas. They plan to improve efficiency in tax administration further, and intensify measures to combat tax evasion. They intend to increase capital spending to rebuild infrastructure damaged by flood in 2009-10 and support economic growth.
Structural reforms remain focused on a few priority areas supporting growth and macroeconomic stability. Program measures aim to enhance revenue collection and expenditure management, strengthen financial viability in the cotton sector, promote financial intermediation, and support private sector development.
Burkina Faso’s external position remains weak. The export base is narrow, and the risk of debt distress is high. To address these vulnerabilities, the authorities seek to support export diversification opportunities, notably in the agriculture and mining sectors, and remain committed to prudent borrowing policies.
Terms of trade and weather-related shocks are the main risks to the economic outlook. They may generate additional public spending and hamper fiscal consolidation. Efficient implementation of growth-enhancing reforms and progress towards export diversification would help the authorities mitigate these risks.
The authorities are requesting a waiver for nonobservance of the PC on the fiscal deficit at end-June. Staff supports the request because the breach was temporary. It recommends the completion of the first ECF review based on the authorities’ performance record and policy commitment.
Front Matter Page
INTERNATIONAL MONETARY FUND
BURKINA FASO
Prepared by the African Department
Approved by Peter Allum and Thomas Dorsey
November 18, 2010
Relations with the Fund. Describes financial and technical assistance from the Fund and provides information on the safeguards assessment and exchange rate system. Outstanding purchases and loans amounted to SDR 77.14 million (128.14 percent of quota) at end-October 2010.
JMAP Implementation. Describes Bank-Fund collaboration.
Statistical Issues. Assesses the quality of statistical data. Weaknesses in a broad range of economic statistics are hampering the analyses of economic developments in the country.
Contents
I. Relations with the Fund
II. Joint Management Action Plan (JMAP) Implementation.
III. Statistical Issues
Front Matter Page
Press Release No.10/470
FOR IMMEDIATE RELEASE
December 3, 2010
International Monetary Fund
Washington, D.C. 20431 USA
Front Matter Page
December 3, 2010
